In a notice to exchange, Engro Holdings (ENGROH) informed that Engro Corporation has entered into a Share Purchase Agreement (“SPA”) to sell Engro Eximp Agriproducts (Private) Limited (EEAP). The company’s Board of Directors has approved the decision to divest its stake in EAP. The share purchase agreement is made with MAP Rice Mills Pvt Ltd. (the Acquirer), an affiliate of Bestway Group.

§  The transaction is valued at Rs2.4bn, based on debt-free and cash-free valuation. The completion of the transaction is subject to the fulfilment of certain conditions, as mutually agreed by both parties.

§  To note, the subsidiary EEAP on Engro book’s actual cost is Rs7.5bn as of Dec’23. The company also recorded a provision for impairment of Rs3.9bn in Engro Eximp Agriproducts (Private) Ltd till 2023. This brings down the net cost on the book to Rs4.25bn

§ Based on the above numbers, Engro may record a one-time loss of Rs1.8bn, in our view, translating into a loss of Rs0.9/share after tax adjustment (39%), 4-5% of the earnings.

§  ENGROH is currently trading at 2025/2026 PE of 9.6x/7.9x.

Courtesy – Topline Pakistan Research